How identity theft affects your credit score

Thieves can ruin your credit, but you can repair the Harm
By Brady Porche  |   Released: August 9, 2017

Staff ReporterFocusing on credit scores and what consumers can do to improve them

Identity theft can unfairly hamper its victims’ ability to
Get credit and loans — on top of other hardships.
The activities of fraudsters can affect your credit score in myriad
ways. The harm can be temporarily catastrophic, but you can avoid serious
Long-term effect by quickly contacting your card issuers and filing
Disputes with the major credit agencies.    
Four Decades ago, Bradley Shaw of Texas watched his credit score
Fall from 780 to below 700 after his identity was stolen.
“I spent many hours online filing disputes with all three
Credit reporting agencies,” Shaw said. “In all, I spent over 50 hours over
Six months in an effort to repair the damage.”
Shaw was fortunate to have a stellar credit score prior to
the theft. But for many consumers, losing more than 80 points could stop
Them from getting credit cards and loans with favorable terms, or any charge at
all.
Here is how identity theft can affect your credit score,
Based on some of FICO’s key scoring components.
Payment history: The
Thief is not ‘good for it’If a thief opens a credit card or takes out a loan with
Your private information, chances are he is never going to pay the balance.
Credit card issuers typically report late payments to credit bureaus once
They are 60 days past due. Payment
History accounts for 35 percent of your credit score, and a single missed
Payment can make it to fall by as many as 110 points.
It takes some time to repair credit score harm from fraud, even
After you’ve reported it to the card issuers and closed the cards.
“Building credit takes time no matter the circumstances, but
The quantity of time it takes to do so varies,” said Heather Battison, vice
president of TransUnion. “That is also true for repairing credit after identification
theft. Each situation is different. No matter what, it’s important to respond
Quickly in case you think your identity has been compromised.”  

“Building credit takes time, regardless of the conditions, but the amount of time it takes to do so varies. That is also true for repairing credit after identity theft.”

Battison said TransUnion typically resolves disputes within
45 days, if the customer offers proper documentation. That can include a
Police report and a letter from the lender stating how the account ought to be
Corrected, among other documents.
Failure to act will worsen the damage. If a burglar rings up a
High balance in your name and doesn’t pay, the outstanding debt will eventually be turned
over to a collection agency. That is another derogatory credit report thing that
can cost your credit score over 100 points. If that’s not enough, lenders can
Also pursue legal action against you for unpaid debts.
“If someone knows this action and these debts go unpaid — which they always do — the creditor might sue the person for the balance
They ‘owe,”’ Battison said. “People can fight these types of lawsuits and they
May win if they can establish that they’re a victim of identity theft, but the
Battle will run up legal expenses, not to mention the time it takes to tend to the
matter.”
Battison also noted that a thief can use your personal
Info to drain your checking account, which can then result in missed
Payments on your legitimate credit report.  
Credit utilization: Take
It to the limitIf a thief applies for a credit card in your name and gets
It, the likelihood of the card then being spat out are high. FICO estimates that charging
Up to your card’s limit can decrease your score by as many as 45 points.
Identity theft expert Rob Douglas said thieves often ring
Up significant balances on fraudulent credit cards immediately since they know the
Fraud will eventually be discovered.
“The chances are that the card’s going to have closed down
Before they have done much, so they want to maximize it as rapidly as possible,”
Douglas said. 
Length of credit
History: Card binge shortens your ‘life span’Let us say a thief obtains your personal information and
Applies for five different credit cards in a span of a couple weeks or months. If
All those programs are accepted, it significantly decreases the length
Of your credit history, which accounts for 15 percent of your credit score.
It may not be such a problem if you have several card or
Loan accounts which are 8 to 10 years old on average. But suppose your credit
History consists of one card that is 5 years old and another that is 2 decades
old. If five new cards have been added to your account at once, your typical age
Of accounts drops from 3.5 years to 1 year.
Your score must return to normal in a short amount of time
If you examine the cards as fraudulent and file disputes with credit bureaus right
away.
Douglas said sophisticated credit card fraud rings usually
Don’t open multiple credit lines in one victim’s name since it can arouse
suspicion. But there are exceptions. In June 2017, a Washington woman was arrested
for an identity theft spree that spanned two counties. One of the woman’s
Victims said in court that nine credit cards had been opened in his name and
That his “perfect” credit score was destroyed.  
New credit: Multiple
Inquiries add upA burglar can only obtain so many credit accounts in your name — finally, issuers may balk at the sight of so many new accounts and start
denying further applications. But that may not stop the thief from attempting, and
Every credit application generates a challenging inquiry
on your credit report.
Hard inquiries typically ding your credit score by about
Five points, but an avalanche of applications can send your score into a
freefall. Hard inquiries not related to fraud typically stay on your credit
Report for two decades, but fraudulent ones can be eliminated sooner by filing disputes
With the credit agencies, Battison said.  
It’s not the worst thing that can happen, but …Credit score harm is not the worst possible outcome of
identity theft. According to the Federal Trade
Commission, a burglar can file a tax return in your name and take your refund
Or perhaps give your name to the police while being arrested. But a credit score
Collapse — whatever the cause — can hurt your ability to borrow in the short
term. Plus it takes time and effort to reverse the effect of identity theft.
“Identity theft can have a lasting impact if it’s not
Addressed quickly and correctly,” Battison said. “That is why we always recommend
Customers take preventative measures to safeguard their credit.”
By taking the right
Steps to protect yourself — by checking your credit report regularly at CreditCards.com and securing your
Personal information, among others — you can focus on building and maintaining
Excellent charge without fear of sabotage.  

WHAT TO DO WHEN YOUR IDENTITY HAS BEEN STOLEN

If you’ve been targeted by an identity thief, it’s critical to take these steps as quickly as possible to mitigate the harm.

Speak to the card issuer. If you spot a credit card account in your name on your credit report that you did not apply for, call the bank or issuer’s fraud section and send an additional notification in writing.

Place a fraud alert on your account. Contact Equifax, Experian or TransUnion and put a fraud alert on your report. You only have to contact one of them — the bureau you call is required to notify the others, and they will all be alerted within 24 hours.

File a dispute with a credit bureau. Notify one of the credit reporting agencies in writing of inaccurate information that appears on your credit report. Explain why it’s inaccurate and ask that it be eliminated. If the information is proved to be inaccurate, all 3 credit bureaus must correct it in your file.

Call the police. Contact your local authorities and get a copy of the police report. The police report permits you to prove a crime was committed when you are dealing with creditors and filing identity theft reports.

Change your passwords. Create new passwords for every online account that contains your personal information. Begin with your bank and credit card accounts and then change passwords for different accounts which involve money transactions (i.e., utility providers, Netflix, PayPal).

See related: Bluesnarfing is newest card fraud at gas pumps and ATMs, Suspect card fraud? How to file a claim

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